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Straight Talking

29 November 2019

By Peter Wallwork, CSA CEO

The #debtthreat campaign is talking to the wrong audience.

Compliance can take a great deal of credit for bringing greater consistency in how a service is delivered, and in protecting consumers with common standards of treatment. Compliance also helps to protect the businesses themselves, assuring them that if they adhere to agreed processes and systems that they will not fall foul of their regulator, or leave themselves open to vexatious complaints.

Sometimes, however, compliance can have unintended consequences. Sometimes the fear of falling foul of the regulator and its rules can lead to actions that whilst designed to protect the consumer, can actually be to the consumer’s detriment.

Take, for example, the statutory, written communication between a creditor (or debt purchaser) and the customer, required to be sent under the Consumer Credit Act. These formal communications – which includes notices of default and notices of sums in arrears (NOSIAs) - are distinct communications that a company is obliged to send. Failure to do so could render the creditor or debt purchaser non-compliant, and the debt unenforceable. It means that not only would it be in trouble with the regulator, but it would also be open to complaints after the event that could prevent it from collecting what is legally owed.

Formal language

The language required in such a letter is undoubtedly formal, complicated, and arguably rather intimidating. Indeed, it has given rise to a specific campaign #debtthreat calling for an end to such communication. But this is where the collections sector is caught between a rock and a very hard place. While the majority of letters it sends are often much more customer-oriented, and very clearly supportive, the formal letters have to use prescribed language, phrases and words that every company has to include.

Now of course it could be argued that prescribed language should not be an excuse for poor letter writing – the focus should always be on helping the customer – but even the most finely crafted letter may appear intimidating to a confused consumer and do little to aid their understanding. The technical nature of the Consumer Credit Act 1974 sometimes means that there is an understandable nervousness in writing documentation that is clear, simple and concise. I think we all agree, also, that a letter that is intended to explain a customer’s situation is of little use when all it achieves is to drive the consumer to seek further explanation, with all of the inherent worry that this brings!

The #debtthreat campaign is understandable, but it needs to distinguish between those letters a creditor is obliged to send to be compliant, and those that it would ordinarily send as ‘business as usual’ in an effort to open the lines of communication with a customer. If the law and the regulator oblige the creditor, to follow a particular path, it is a nonsense to criticise the industry for doing what it is told it has to do.

What the campaigners need to recognise is that the current legislation simply does not allow for formal notices that are flexible or dynamic enough to provide meaningful information to a customer and to address any vulnerability throughout the life cycle of a debt. The campaign needs to target the regulator and the government, for change will require primary legislation. And if that is what Is desired, then we will happily support the debt advice sector and other stakeholders in seeing it comes about.